GAINING TRACTION

In India's growing investment landscape, investors seeking stable income streams may find Infrastructure Investment Trusts (InvITs) to be a viable option

Diversification of investments through different asset classes is widely considered one of the key tenets of portfolio construction, crucial for creating wealth. Common asset classes for this purpose include debt, equity, commodities, and real estate (both physical and in the form of REITs).

Financial product innovation has led to the emergence of Infrastructure Investment Trusts (InvITs), a product with inherently different features from traditional investment offerings. This provides investors with another option for diversification. Although the first InvIT was launched more than five years ago, it has only become more visible in the past year. Understanding a product thoroughly before investing is another tenet of wealth creation.

Therefore, this article aims to demystify InvITs and help readers determine if they are the right choice for investing their hard-earned money.

WHAT ARE INVITs?

The InvITs are trusts that own, operate, and invest in infrastructure-related projects that are completed and/or are under construction, such as roads, highways, power transmission networks, and other similar projects. These projects generate a regular stream of cashflow.

There are three types of InvITs: public InvITs, private listed InvITs and private unlisted InvITs.

Public InvITs are listed on the stock exchange and available to all classes of investors. Private listed InvITs are also listed on the stock exchange but can only be offered to institutional investors and body corporates. Private unlisted InvITs are not listed and are offered to institutional investors and body corporates on a private placement basis.

For the purpose of this article, we will restrict the discussion to public InvITs.